Quality bonus update

Q: When is a quality bonus not for quality?

A: When everybody gets it.

This is what’s happening with the Medicare Advantage quality bonus expansion I posted about this morning.  You may recall that CMS announced on Veterans’ Day that bonus payments originally targeted to high-quality plans (those enrolling about 24% of beneficiaries) would be expanded to plans with lower quality scores too.  Under the proposed expansion, at least 84% of beneficiaries will now be in plans qualifying for bonuses—more than tripling the size of the bonus program.

In this morning’s post I questioned the cost estimate for this expansion and suggested that the motive behind it may be to gain political support from America’s Health Insurance Plans (AHIP).  In response to that post, a reader forwarded to us details about the proposed expansion which I had been unable to obtain from the CMS press office or website.   The current proposal does not duplicate some of the more expensive features of the old program (e.g. double-bonuses for certain plans) so it will be a lot cheaper than my first estimate.  I have redone my cost estimates and the price tag now comes in at $16.1 billion, still more than 3 times the official estimate projected over ten years.*

I think, had the details been available yesterday, I would have written essentially the same post this morning with the lower number.  A “quality bonus” that’s given to almost all plans is really just a back-door rate increase and $16 billion is a lot of money to give away.  Furthermore, the regulations are not yet final and, as you can see from how these estimates have changed, seemingly small details of the program can trigger large increases in spending.  We will be watching as this continues to develop, but the potential for hidden mischief is worrisome.

*CMS may object, saying that the new bonuses are only in force for three years under demonstration authority.  I don’t believe they will go away once put in place, so I think the customary ten-year budget window is appropriate.

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